Are US Stocks Really Up This Year?

Are US Stocks Really Up This Year?

We investigate whether indexes are distorting what’s going on in the market.

Reviewed by: Lisa Barr
Edited by: Heather Bell

Lately, I’ve been hearing over and over that indexes are masking what’s really going on in the market this year. As of April 5, the S&P 500 was up 7.03%, while the Wilshire 5000 total market gained 6.42%. Both are total returns including dividend reinvestments.  

Do these returns really mask what’s going on in the stock market? Here’s my analysis followed by what I think is a clear answer. 

Looking at Morningstar data, returns were very uneven, with value stocks generally declining while growth did well. Large cap growth was clearly the star. This was a general reversal to last year. 



Headlines saying that it was mega-caps driving the market seems to be supported by the data. The five most valuable companies represent more than 15% of the value of all U.S. stocks and gained between 18.9% and 84.0%. 



By my calculations, without these five stocks, the total market would have barely turned in a positive return of only 1.78% instead of the 6.42% of the Wilshire 5000.  

Does this mean the indexes are distorting what is really going on in the market? Absolutely not. What it means is that those picking parts of the market that underweighted these parts of the market underperformed the entire market. Small cap value and other strategies such as smart beta lagged the market. 

If one had merely invested in the market, they could have received the entire market return. The iShares Core S&P Total U.S. Stock Market ETF (ITOT) gained 6.37%, while the Vanguard Total Stock Market ETF (VTI) gained 6.36%. Each follows a total stock index slightly different than the Wilshire 5000. 

My Advice 

It so happens that mega caps drove the returns of the U.S. stock market this year through April 5, 2023. But that is a very different statement than claiming mega caps distorted the market returns. The latter is merely an excuse the experts are making for underperforming the market. Yet again, those “obviously overvalued mega cap stocks” were actually undervalued.  

The fact that a few stocks drove the entire market isn’t as unusual as you might think. It turns out that the best-performing 4% of listed companies explain virtually the entire net gain for the U.S. stock market since 1926. This is according to research by Hendrik Bessembinder, a professor at Arizona State University’s W. P. Carey School of Business. The other 96% earn on average the rate of a one-month Treasury bill. 

Whether mega caps will continue to drive market returns or whether small cap value will have their day is a question to which I know that I don’t know the answer. I do know, however, that, properly measured, low-cost total U.S. stock index funds must beat the average dollar invested in U.S. stocks.  

So my advice is to harness the knowledge of millions of investors who look at each stock and each part of the stock market to come up with a fair value. Avoid the top-performing ETFs of the past, as they are just as likely to be the worst performers of the future.  

Let the experts make their excuses and complain that broad indexes mask the market. Owning the market means never having to make these excuses. It also means you’ll be besting most investors. 


Allan Roth is the founder of Wealth Logic LLC, an hourly based financial planning firm. He is required by law to note that his columns are not meant as specific investment advice. Roth also writes for Barrons, AARP, Advisor Perspectives and Financial Planning magazine. You can reach him at [email protected], or follow him on Twitter at Allan Roth (@Dull_Investing) · Twitter. 

Allan Roth is founder of Wealth Logic, an hourly based financial planning and investment advisory firm. He also benchmarks portfolio performance for foundations and other business concerns. Roth's website is You can reach him at [email protected] or follow him on Twitter at Allan Roth (@Dull_Investing) · Twitter